Unusual Gifts: Donors Need to Be Mindful of Tax Rules

To the Editor:

Your article on unusual gifts (“Treasure Trove or Trash Bin?,” April 4) omits discussion of a key issue.

If a donor contributes personal property to a public charity, he or she may deduct the fair market value of a donated object only if it would produce long-term capital gain if sold by that individual.

Fair market–value deduction is also limited by two significant requirements: (1) if the donor plans to take a charitable contribution deduction of more than $5,000 with respect to the value of the donated object (or group of similar objects), he or she must obtain a “qualified appraisal” of that object or those objects no later than the time he or she files the tax return for the date of the gift; and (2) the gift must be “related to the purpose or function constituting the basis for the exemption of the charity” for full fair market-value deduction to be allowed. An item taken to be auctioned off by the recipient charity never passes this test.

If the object must be appraised, the valuation must be listed on IRS Form 8283 filed by the donor, which must be signed by the appraiser, and by the one donee charity, and the donee charity must answer the following question: “Does the organization intend to use the property for an unrelated use?” If the donated property is disposed of by the recipient charity within two years of the date of donation, the charity must file a report to the Internal Revenue Service on Form 8282.

Failure to satisfy those two requirements will reduce the donor’s deduction to the lower of cost basis or fair market value.

James B. Lyon
Counsel
Murtha Cullina LLP
Hartford, Conn.